Comments that might counter the state’s pension fund position

The unions presented to the court their pension arguments on April 20 and on Friday the state presented its arguments in response. Also on Friday Senate President Steve Sweeney and General Assembly Speaker Vincent Prieto re-stated to the court their position that the pension law “was considered constitutional at the time of its enactment, remains constitutional, and clearly creates a contractual obligation to systematic funding of the pension systems.”

Sen. Sweeney over the weekend said the Democratic-led state Legislature will fully fund New Jersey’s public worker pension system next year … with an addition of $3.1 billion for this year and next. Left unstated is that paying out the current year requirement of $1.6 billion in the next two months is impractical. He did not explain where the money will come from, but he is sending a message to the judiciary that the State can reasonably accommodate the obligation. Gov. Christie, using fear-mongering tactics, has argued that to make full payment would require raising the sales tax from seven percent to ten percent or increasing the income tax by 29 percent.

The unions won the first round in Superior Court. The showdown is scheduled before the NJ Supreme Court on Wednesday May 6. Below the fold are some further comments that might counter the State’s position.  

The State argues that “the contractual right the unions seek to enforce is subordinate to the Appropriations, Veto, and Debt Limitation Clauses. The Legislature cannot create a contract that restrains the constitutionally enshrined power of future legislatures to appropriate funds and future governors to line-item veto appropriations.”  If such were the case why did the governor sign the law and boast about “his” accomplishment? The unions and the two lead legislators argue forcefully in their briefs that the contract does not subordinate appropriations, vetoes, and debt limitations. Rather the unions are seeking enforcement of a payment schedule.

The State argues “As more of these statutory contracts are created less of the the annual budget will be available to the state to meet other important public needs.” However, any such future contracts passed by the legislature will require a governor’s approval or a veto over-ride. Also what is now significantly impairing the state’s ability to meet other important needs is high general indebtedness, not just Pen/Ben.

The state argues that the more than $4 billion it will have contributed in the past five years demonstrates that pension contributions do not require the evisceration of the fiscal clauses. However, the reality is that New Jersey’s pension hole got $4.5 billion deeper last year. Actuarial reports “compiled for the state’s pension boards show the retirement funds’ debt grew 13 percent between July 2013 and July 2014, a year in which Gov. Chris Christie slashed the payment toward the pensions when tax collections missed forecast.”

The State claims the unions acknowledge the impossibility of finding $1.7 billion at “this point in the fiscal year” to make the full payment. Such may be true, but the legislature passed a budget last year with solutions that the governor vetoed. Just because he once again fails to propose a budget that meets the obligations and claims at the last moment he lacks the funds is no reason to give him another pass. Even if it would be catastrophic to remove such a large sum from the last two months of the FYI 2015 budget, why not agree to a compromise – assuring that the full two-year amount will be contributed next year, which is what Sen. Sweeney proposes?

For a full listing of documents submitted to the court by various parties in this case go here. For earlier arguments on this case go here.

Regardless of what the Supreme Court’s decides, its verdict will be hugely significant – either vindicating the state or the unions or creating some middle ground.  

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